The PulteGroup first-quarter nutshell: Orders look good, but that's partly with a big assist from the company's choice to change its count in Q1 2010, which improves the comparison immeasurably. In fact, fairly flat orders is a big positive, so the company gets kudos on that score. Too, cancellation rates were down from 18% to 16% in the period. This probably ties to the company's segmentation and positioning, where move-up, second-time move-up, and active adult buyers wouldn't have the same credit (dis)qualification travails as those who buy from more entry-level oriented builders.

Cascading down to some of the other financial metrics, analysts' use of the terms "improved" and "mixed bag" of results tend to ring true. PulteGroup, it could be said, still has enormous work cut out for it in areas it can manage, and then it has to deal as well as possible with home buyer credit conditions and its exposure to melted-down markets on an opportunistic basis. The balance-sheet management job shows pluses and minuses, and the overall operational go-forward plan suggests the jury's not in on whether the 2009 merger masterplan is on track or not.

Here's a couple of the analysts' key takeaway lines

UBS's David Goldberg: "Although PHM’s results were impressive given the challenging backdrop, we believe this is already reflected in its current valuation. Further, in spite of this quarter, results remain below peers. We look to future quarters for signs that this underperformance is narrowing. In the interim, we await a better entry point."

Ticonderoga Securities' Stephen East: "Reported Orders were basically flat at 4,345 versus our expected 10% decline; however, when backing out a change in Order counting methodology, PHM basically hit our estimate. We are not denigrating the result, as our field research has specifically shown that move-up and active adult segments are coming back."

JP Morgan's Michael Rehaut: "PHM reported 1Q EPS of -$0.10, slightly better than our -$0.12E and the Street’s -$0.13. Results featured order growth of +1% YOY, which reflects the company's new community accounting method, modestly below our +6%E, core operating margins (ex-charges and interest expense) of -0.5%, moderately below our 1.6%E, and land-related charges of $0.7 million, well below our $30 million estimate. Moreover, PHM noted that it was encouraged by traffic and orders within the quarter, which not only showed sequential monthly increases but also exceeded the company’s internal forecasts."

Citi's Josh Levin: "PHM stated that it will 'achieve profitability in the back half of 2011.' We note that consensus EPS estimates for 2H11 already reflect a modest level of profitability."

PulteGroup, Inc. Reports First Quarter 2011 Financial Results

BLOOMFIELD HILLS, Mich., April 28, 2011 /PRNewswire via COMTEX/ --

Net New Home Orders Totaled 4,345, a Sequential Increase of 43% from Q4 2010

Adjusted Gross Margin of 16.9% Increased 60 Basis Points Over Prior Year

Homebuilding SG&A Reduced by 10% to $136 Million

Land Impairment Charges Drop to $0.7 Million

Loss of $0.10 Per Share Reflects Lower Closing Volumes Partially Offset by Improved Margins and Cost Controls

Cancellation Rate Dropped to 16.1% from 18.3%

Quarter Ending Cash Balance of $1.4 Billion

Company Expects Improving Margins and Greater Overhead Leverage to Drive Profitability in Second Half of 2011

PulteGroup, Inc. (NYSE: PHM) announced today financial results for its first quarter ended March 31, 2011. For the quarter, the Company reported a net loss of $40 million, or $0.10 per share, compared with a loss of $12 million, or $0.03 per share, for the comparable prior year period.

"We are encouraged by traffic and orders within the quarter which showed sequential increases from month-to-month, while we exceeded internal forecasts for the period on key business drivers including net new home orders and margins," said Richard J. Dugas, Jr., PulteGroup Chairman, President and CEO. "An improving economy is slowly beginning to generate new jobs which over the long term should translate into stronger consumer confidence, both of which are critical to a meaningful and sustained recovery in the U.S. housing industry.

"Over the near term, we expect the industry will continue to face low levels of demand and that overall operating conditions will remain highly competitive. Within this environment, we remain focused on implementing actions that can drive further margin expansion and sustained overhead leverage. In combination with anticipated higher closing volumes, we expect that the financial benefits associated with these actions will enable the Company to achieve profitability in the back half of 2011."

Revenue from home sales (settlements) in the first quarter declined 20% to $782 million, compared with $977 million in the prior year. Lower revenue for the quarter reflects a 17% decrease in closings to 3,141 homes, combined with a 3%, or $8,000, decrease in average selling price to $249,000. The decrease in average selling price primarily reflects a shift in the mix of homes closed during the quarter.

First quarter cost of sales related to home sales totaled $685 million compared with costs of $850 million in 2010. Prior year cost of sales included $5 million of impairments and $2 million in merger-related costs; these expenses were immaterial in the current period. Excluding impairments, capitalized interest expense and merger-related costs, gross margin for the quarter would have been 16.9%, compared with a comparable prior year gross margin of 16.3%. The improvement in adjusted gross margin reflects changes in the mix of houses closed and ongoing initiatives to reduce house construction costs.

Homebuilding selling, general and administrative (SG&A) expense for the quarter was $136 million, down from $151 million in the comparable period last year. Although down approximately $15 million in absolute dollars, on a year-over-year basis SG&A increased as a percentage of home sale revenue as a result of the approximately 20% decrease in revenue for the quarter.

The Company's first quarter homebuilding pre-tax loss was $41 million, compared with a $12 million pre-tax loss in the comparable prior year period.

Net new home orders for the first quarter were 4,345 homes, compared with net new orders of 4,320 for the first quarter of 2010. As previously announced, a change in the Company's signup process reduced reported first quarter 2010 orders by approximately 450 homes. Sequentially, orders for the quarter increased 43% from the fourth quarter of 2010. Net new orders in the quarter benefitted from a decrease in cancellation rate to 16%, compared with an 18% cancellation rate in the first quarter of last year.

PulteGroup's quarter-ending backlog was 5,188 homes valued at $1.4 billion. Prior year backlog totaled 6,456 homes with an estimated value of $1.7 billion.

The Company's financial services operations reported pretax income of $1 million for the quarter, compared with prior year income of $5 million. Loan originations for the first quarter were 1,865 compared with prior year originations of 2,325. Lower pretax income and originations for the period directly reflect the impact of reduced closings in the Company's homebuilding operations. Mortgage capture rate for the quarter was 76%, compared with 75% for the same quarter last year.

The Company ended the quarter with a cash balance of $1.4 billion, including restricted cash. Prior to the close of the quarter, PulteGroup announced its decision to terminate the Company's $250 million revolving credit facility. Terminating this facility will save the Company an estimated $5 million annually, but resulted in a one-time charge of approximately $1.3 million for the quarter.

John McManus is editorial director of Big Builder.